The plight of Britain’s generation of renters was laid bare this morning, as new figures showed that those in the private rental sector could outnumber mortgage-holders in a decade.
City analysts say there are now 5.4m households in the UK’s private rental sector – more than double the same figure from 2001.
By 2025, there are expected to be 7.2m households made up of private sector renters, equal to or more than the number of households projected to have a mortgage.
The switch to renting is caused by falling housing affordability, experts say, largely due to insufficient housebuilding. According to PwC, which conducted this morning’s research, prices will climb five per cent this year and continue this trend for the next 10 years.
The news comes just a day after the Centre for Economics and Business Research, a think tank, hiked its 2015 house price growth forecast to 4.7 per cent amid concerns that housing supply is growing too slowly.
PwC chief economist John Hawksworth said this morning that “a large and sustained increase in affordable housing supply will be required” to reverse the trend of higher prices and falling affordability.
He said the government should take steps to encourage housebuilding and criticised some recent measures that could dampen it.
“Cuts to social rents announced in the Budget will tend to work against this for local authorities and housing associations, while private developers may be cautious about expanding too rapidly,” he said.
“We expect housing supply shortages to persist for at least the next decade and realistically expect to see a continuing rise in generation rent until at least 2025.”
The changing landscape of British homeownership has been noticed by the investment community. The
UK’s biggest fund manager L&G is planning major investments into new homes to generate rental income. In 2013, it bought a 48 per cent stake in CALA Homes, one the UK’s 10 biggest housebuilders. Another major investor, M&G, spent £25.2m in May on a homebuilding project in Bath with Crest Nicholson that it described as “the first deal of its kind” between an investor and a housebuilder.